Now I wouldn't normally write about this. Why would you wish to share in the private grief of someone who happens to be a member of that fund?

That said, the BBC is a public-sector organisation, albeit one proud of its independence from government and not financed out of general taxation (apart from the World Service) - and what it is doing may therefore influence how the new coalition sets about reducing the costs and liabilities associated with those supposedly gold-plated final-salary pensions in the rest of the public sector.

One important difference between the BBC's final-salary pensions and much of the public sector is that the BBC has a funded pension scheme, whereas the pensions of state employees (apart from those in local government) are typically paid directly out of general government revenues.

But the distinction has become more academic than it was, following a massive increase in the deficit in the BBC's pension fund (also announced today), from £470m at 1 April 2008 to around £2bn at 1 April 2009.

There'll be a new three-yearly valuation of the current position, but it's thought that the deficit has fallen only a bit from that £2bn (a recent reduction of the benefits paid to those who leave the BBC may have eaten into the deficit).

The trustees of the BBC's scheme believe this more-than quadrupling of the deficit is not a significantly worse performance than that of similar schemes. Some will query that: the 2008-9 deepening of the deficit hole was worse than the average for private-sector funds in deficit, according to data from the Pension Protection Fund (the PPF uses a different valuation method).

That said, the lack of any substantial reduction in the size of the deficit during the past 12 months may have been beyond the control of the funds' advisers and managers. It is largely attributed to a fall in the yield on AA corporate bonds, or the discount rate for putting future liabilities into today's money - when the discount rate falls, the value of liabilities automatically rises (see my post "BT: a blacker pension hole" for a detailed explanation of the link between the price of bonds, the bond yield and the size of a fund's liabilities).

Whatever the cause of the big deficit, the important point is that there is a whopping deficit. And under pensions law introduced by the previous government, it is a very significant debt of the corporation which needs to be closed.

Which is why - at a time when the government is grappling with massive public-sector borrowing - what is happening at the BBC now looks very similar to the pressures on other public-sector pensions.

To state the obvious, closing the pension-scheme deficit while maintaining benefits payable to BBC employees would require a very significant increase in payments into the scheme, from employees and from the BBC. And the BBC's directors have taken the view that licence-fee payers won't tolerate a rising share of the licence fee being deployed to support the future pensions of BBC staff.

This is obviously moot. It'll spark something of a debate within the BBC (ahem).

So what is the BBC actually proposing? Well having already closed the pension scheme to new members in 2006, it now wants to massively reduce the future benefits of some 17,000 contributing members.

There'll be lively debate about whether its plans - very similar to those at Marks & Spencer 18 months ago that sparked massive controversy - are in fact more generous than simply closing the scheme altogether to all future contributions.

This is quite complicated, so bear with me.

In the BBC scheme, the entitlement is that for every year worked an employee can expect to receive an annual sum on retirement equal to 1/60 of his or her annual salary.

So working for a year on a salary of £35,000 generates a pension in retirement of £583.33. And if an employee were to work for the BBC for 40 years and were paid £35,000 in his or her final year, the employees' pension would be 40/60 of £35,000, or 2/3 of £35,000, which is just over £23,000.

Here is where it gets a bit tricky. Working a year will still generate a pension equal to 1/60 of salary, but each of those sixtieths will be worth less than they were.

How on earth can that be?

Well for two reasons. First of all, whatever happens to actual salaries, the pensionable salary of staff will in the future rise by no more than 1% a year.

So if an employee is promoted and receives a 10% increase in salary, that won't generate a 10% increase in pension, as it would have done in the past: it'll only generate a 1% increase in pension.

And there's a second sense in which those sixtieths have become much less valuable.

In the past, those sixtieths were more than protected against the effects of inflation. No longer.

The value of any previously earned pension is currently increased every year by RPI inflation plus 2%. Any new sixtieths will increase in value by 1% per annum, with no protection against inflation.

In other words, even for those approaching the end of their careers who don't expect their salaries to rise much, the real value of future contributions to the scheme has been very significantly reduced (unless of course we're about to enter a period of sustained falling prices or deflation, in which case up-rating the sixtieths by 1% would be top hole).

What does it all mean?

Well, when a BBC employee looks at his or pension statement under the new arrangement, the value of his or her "earned" pension should not change. The pension entitlement already built up should be protected and proofed against inflation (or so I am told). But there will be a fall - in many cases a big fall - in the projected value of the pension aged 60.

For those relatively early in their careers at the BBC, who expect their salaries to rise sharply, the impact will be so great that they would probably be bonkers to make any future contributions to the scheme - though they'd almost certainly want to retain whatever benefits they've already built up.

Even those on relatively high salaries, who don't expect their earnings to rise, will have to think twice about whether it makes sense to continue with contributions.

The changes will inevitably cause a massive outcry among staff, as happens in the growing number of private-sector companies which close their schemes to all future contributions or cap their liabilities in this way (although I should point out that not all stretched companies reduce benefits to this extent: BA, which is arguably in much worse financial shape than the BBC, has kept its seriously indebted schemes open for contributions).

The point is that members of defined benefit or final salary pension schemes almost never read the small print. When they receive a statement from the BBC or another employer saying that if they work till retirement they would receive a salary of £XX,000, they regard that as a cast-iron promise.

So when they're told that it wasn't a promise, but a projection based on variable assumptions, well they tend not to be amused.

I imagine therefore that George Osborne and David Cameron will be looking quite carefully at how and whether the BBC gets its pension changes through. Because if they could impose a similar 1% annual cap on future additions to public-sector employees' pension entitlements, the savings would run to billions of pounds per annum.

Update 1030: On reflection, the inflation plus 2% annual increase in the sixtieths currently eamed by scheme contributors - to which I referred earlier - must be the actuarial assumption of what will happen to salaries for the calculation of scheme liabilities, not the actual formal guarantee to scheme members. Contributors must be receiving protection for their sixtieths equal to RPI inflation - which will now fall to 1% for future sixtieths.

Update 1205: This is where I begin to fear I've stepped through the looking glass, because it looks to me as though the BBC proposals would in fact reduce the value of accrued or earned benefits as well as new ones.

Here's the relevant excerpt from the BBC's booklet on the changes:

"If you choose to remain in the scheme for future service, benefits built up before 1 April 2011 will continue to increase to your retirement (or when you leave the BBC) in line with annual salary increases, limited to 1% each year.

"If you choose to join the DC (defined contribution) plan for future service you will become a 'deferred member' of the scheme and stop building up benefits in the scheme. The benefits you have built up will increase broadly in line with inflation to your retirement".

What that implies is that even members' so-called "earned" pension will only be up-rated between now and retirement at 1%, not at the inflation rate, if they stay in the scheme.

In other words, unless deflation sets in, there would be a real cut in the value not only of future entitlements but also of the pension that contributors had thought was earned and guaranteed.

It appears that only if members leave the scheme can they be certain that past benefits will be up-rated in line with inflation.

There appears therefore to be a big financial incentive for everyone to leave the scheme.

Some may see what the BBC has done as a way of effectively closing the scheme without saying that in so many words.

Comment number 2.

This is very similar to what is happening with my private sector pension at the moment. Although I am clearly personally unhappy that all my financial planning is messed up, I understand the need for change. It is perfectly right and proper that all organisations should review their pensions provision - and this is why the government should review all publicly funded pensions. One question, why does Robert refer to a pension value at age 60 - is this standard retirement age for the BBC pension scheme - if so, this re-inforces the gold plated nature of schemes in the public sector - most private ones use 65, earlier retirement comes at a higher investment level, and with large penalties.

Comment number 3.

Great News from Spain ! The School Summer Hols have started and all those hundreds of thousands of young healtly teachers are now lying on the beach having driven from their nice house in their nice car and they won't have to go back till mid September ! - fantastic ! and they won't have to worry about old age in later years as they have fantastic pensions... Since joining the EU they done so well ! What you can't do with a grant paid for by those mean greedy English old people who are always moaning about the price of everything !How much do we hand over to Europe each year ?"We need to do strong cut backs" - Well hows about cutting back this ?

Comment number 6.

At last someone has drawn the distinction between the Local Government Pension Scheme (LGPS), which is funded by its members, and the majority of Public Sector schemes which are funded by the taxpayer.As far as I am aware the LGPS is both the biggest scheme in the UK and solvent.It's also worth pointing out that it used to be compulsory to join the LGPS on being employed in Local Government,but Mrs. Thatcher removed the compulsion, and then Mr. Brown came along and taxed the fund.Even so it is still solvent.Perhaps Robert could get the government to remember these points from time to time. Of course I am sure Mr. Osbourne will look after the pensions accruing to honourable member?

Comment number 7.

These public and private sector final salary schemes should have a limiting factor anyway. It is ridiculous that executives who have enjoyed six figure salaries should have pensions in the same bracket. Pensions should have an upper limit, perhaps 50 to 60 thousand pounds which is ample for anyone's needs after retirement.This should be applied across the board ,to private or public service pensions. Then perhaps the liability would be reduced and there would be a bit more in the pot to increase the pensions of those people on lower salaries.

Comment number 8.

As a former BBC staffer who paid maximum contributions into it for 20 odd years I have mixed feelings about this. The generious pension deals given to many many colleagues ten years older than myself right up to today were a disgrace and should be looked into. Many - in the last few months even - have been give maximum redundancy payments followed by full inflation linked pensions. That's a scandal with public money - not just at this time!I have a bit of time to (return to) work and plan. I"m not clear what effect it has on my pension - and it might have been better to let us know before the news bulletins (on which I used to work) So I accept all those who say this is just what's going to happen in the public sector. BUT and it's a bit BUT people always assume that it's possible to work longer - when in some occupations (news journalism is one of them) barely anyone lasts past 50 (due to the 24 hour shifts and ageism too) So would I advise anyone now to take this up as a career? No way. The excitement and pension (which went with a less well paid job than I could have got in the city etc etc) won't in future be making up for the financial drawbacks - bright graduates with choices go elsewhere. Broadcast journalism will excited you for two decades then leave you without a career or money or pension worth anything.

Comment number 9.

Pensions : If business borrows £100 to pay Workers to make goodsand wants to sell it to Workers - now Consumers for £120Then Consumers or Government need to go into debt for £20.If however Workers decide to 'save' their wages - say £30 for a pension -then Consumers or Government will need to go into debt for £50 to buy all the goods and keep the 'economy' going.So in a very real way Pensions are actually 'funded' by consumer and Government debt !If however you stopped being silly and used a modern financial system like NEFS - Net Export Financial Simulation, they we wouldn't have this problem. We also wouldn't have people hanging round the BBC for 40 years having run out of ideas after 2... because of their pension.

Comment number 11.

Sometimes it is necessary to state the obvious. Pensions are the result of investing money (except pay as you go schemes - state pension mainly). When the investment market's interest rate collapses as it has done (as the result of totally inept and mindbogglingly stupid non-regulation by the Bank of England and the Treasury) then the capital built up will not provide the pensions promised.

The only remedy for the problems of pension funds is to see a rise in annuity rates and as these relate directly to market interest rates the only remedy is to see substantially higher interest rates. Nothing else will prevent the ever downward spiral of pension funds. Blame Mervyn King!

Comment number 12.

6: The LGPS may be funded, but by whom? By council tax payers, nearly 30% (thirty!!!) of which goes to pensions. If my company tried to use 30% of the selling price of our goods to stick in the pension scheme we'd never sell anything, they'd be way too expensive.

Council taxpayers have to pay council tax - it's mandatory by law. This is a massive advantage in ensuring the pension is "funded". Deficit in your scheme? no problem, just stick council tax up.

Gravy train for the public sector is coming to the end of the line. Welcome to the real world people.

Comment number 13.

"Whatever the cause of the big deficit, the important point is that there is a whopping deficit."

Sorry Robert I disagree, because I am cursed with memory. I remember that in the seventies, when finance and commerce were supposedly hamstrung by regulation and trade union power, pension funds were solid as a rock and always in surplus. So when we've completely reorganised the global economy for the convenience of those sectors, spent huge sums to ensure they can always hire the "most talented", and listened for most of the past thirty years to their boasts of the fantastic success they are providing "for everyone", I really would like to hear some convincing explanations.

Comment number 14.

Interestingly, the changes proposed seem to fall most heavily on the youngest workers. It is they who will have their pensionable salary capped even if they get promotion, and they who will see their pension eroded through inflation. From your explanation of the scheme, those who come into the BBC at a senior level late into their careers will be affected the least.

Is this yet another case of those in charge of pensions (who tend to be older) transferring the cost to the young?

The worry for me is that this may well form the basis for future public sector pension reform: the baby boomer voting bloc have shown themselves quite happy to mortgage future generations to protect themselves, and it worries me that this sort of reform would be the easiest politically for Osborne to push through.

Comment number 17.

" not financed out of general taxation " - although it is funded from the licence fee which is more widespread than general taxation !

Pension values are often quoted at 60 because in a 1/60th scheme there's a good chance of hitting the 2/3 ceiling at age 60.

Let's not forget Gordon Brown's "Robert Maxwell memorial budget" raid on pension funds by withdrawing ACT relief and the countless other rule and legal changes that have forced pension schemes to have a lower percentage in equities etc with consequent lower yield - surely these factors are what has killed off the final salary schemes ?

Comment number 19.

I don't know what your complaining about Robert, you should have tried the money purchase scheme I was stuck with for over 30 years. I still have the origional projection that showed I would recieve £430,000. In actual fact after 30 years I cashed it in because the fund was going down each year by a greater amount than I was paying in. I done a few calculations and took the pension early when I discovered it was within pounds of exactly what I had paid in across the years. I would have been better off paying it into a current bank account.

Then on cashing in I am limited to what I can take as a lump sum and have to buy an annuity with the rest which effectively pays an interest rate current at the time, in my case about 2% fixed for life. I will have to live another 34 years just to break even on the lump sum I have paid into the annuity by which time the £2400 per year it pays will just about buy a loaf of bread. Even so, the amount it does pay is reduced from any benifits I may recieve in the future.

As I tell my children and anybody else who cares to listen, do not start a pension scheme, ever, never! By all means save for the future but manage the investment yourself, you would be hard pressed to do worse than these so called experts who take a greater percentage in 'charges' than the fgund actually makes.

Speaking of the future ask yourself this, how much money do I need for the future? And then ask yourself how much you need having just received the news you are going to die tomorrow. All personal money is just an insurance policy against an uncertain future.

Comment number 20.

Comment number 21.

Rogue Male wrote:--At last someone has drawn the distinction between the Local Government Pension Scheme (LGPS), which is funded by its members, and the majority of Public Sector schemes which are funded by the taxpayer.--

Comment number 22.

The BBC pension scheme sounds exactly the same as mine in the private sector, or at least the one I will have until Thursday. The company feels that the scheme is no longer affordable and that's that. Those who have payed into the scheme can still receive the benefits built up during that period, but further contributions go into a new money purchase scheme that takes the defecit risk away from the company. It's no fun, but we can only afford what we can afford and the same goes for the public sector.

While some will bemoan that it is unfair, or that the bankers should pay for it, etc - that ignores the fact that national debt was increasing as a proportion of GDP for about 6 years prior to the banking crisis - during a period of sustained growth. If we couldn't afford it then, we definitely can't afford it now. Similarly if the BBC and other pension funds weren't running a large surplus during a period of sustained growth then clearly there is something wrong with the way they were being managed, be that too many bonuses for managers, investing badly, or simply offering more in their pensions than they could realistically achieve.

I just hope that any changes do not have too severe an impact on those nearing retirement and therefore unable to adjust any financial plans they've made for their retirement.

Comment number 23.

When Gordon Brown announced the removal of the dividend income tax credit most people did not understand. What it meant was that in the private sector, most final salary pension schemes have been abandoned.

The money purchase schemes that replace it are poor. As a person who came out of a final salary scheme in 2006 and into a new money purchase scheme I can report that the pension "pot" in this new scheme is no greater than the sum of the contributions made over the past 4 years. The pension company always takes out its fees and charges.

It is a sobering thought that in my modest ISA's, cash savings accounts and unit trusts it is the professionally managed pension fund that has performed the worst. Yes that right, I would have been better off deposting the money into Tesco's or Sainsbury (if the rules would have allowed that).

However, I digress. The scandal of public pensions is that 98% are not funded and that large amounts of taxation is raised just to pay current pensions - the same for council tax.

Another scandal is how many people in the public sector are promoted in their final year or two - just so they reap the rewards of greater pensions.

I would think there are many tens of thousands of public sector workers, in their mid - late 50's rubbing their hands at the thought of redundancy followed by their enhanced pension which can be drawn immediately. In fact fo some, in financial terms, it will not make much difference whether they work or not. (new figures released by the Government show that 12,500 public centre empoyess receive a pension and a salary).

This story will run for quite a time. Now it involves the public sector perhaps we can have an honest and real debate about pension provision in this country!

Comment number 24.

With the benefit of hindsight, 1 April 2009 was one of the worst days to carry out a funding assessment based on market values.UK equities up 37% since then.UK bonds up 22%Gilts up about 4%Although the liabilities will also have moved, have to wonder whether the BBC has sold these cuts on a £2bn deficit, which won't be there today? Naughty auntie?

Comment number 25.

When I worked for the BBC (81 - 86)there were 26,000 contributors and it was feasible at that time for an employee contribution holiday (not implemented). The contributor base has shrunk and the beneficiaries has expanded but also what of the effects of the mass severence on the pension scheme and the extraordinary inflation in top salaries generating current and future liabilities. Interesting that a cap (eg £50K) does not seem to have figured. The BBC is obviously the advance guard for the public sector in the incremental destruction of corporate pension schemes. There should be a public enquiry into the decline of private and public schemes and the implication for public policy.

Of course with the current valuation methods and the state of the investment market deficits will appear but the question is over what period are deficts calculated and assumptions made and over what period are 'genuine' deficts amortised. This is turning into a national scandal.

Comment number 27.

John, on the whole I like your posts but I am always a little disappointed with your 'blame Mervyn' rhetoric. Correct me if I'm wrong but I believe that Mervyn's hands were pretty well tied by the government. The BoE remit was conrol over interest rates without government interference with the proviso that they keep inflation at or about 2% as measured by CPI, that is with property inflation removed. Under those circumstances I can see little that Mervyn could achieve in the property boom short of resigning and we all know if you resign you no longer affect policy at all.

Comment number 28.

How come pensions seem to only become headline news when middle/old age workers fear that they will have to slightly downgrade their retirement plans?

Just the one villa in Spain then? At aged 60!

At 23 I am already resigned to the fact that I will be working until I drop to fund the gold-plated pensions my parents/grandparents have awarded themselves. Oh, and did I mention that whilst I contribute to their 20 odd years of Saga cruises, such generous schemes have already been closed to me!!!!

And I don't want to hear any complaints that I am 'young and greedy', this is such a cop out of a reply. I would happily support workers of any age, sector or social class in their right to secure a decent lifestyle in retirement - as long as such benefits were also available to me.

Comment number 30.

While the BBC may be independent from government it is not free from taxation. The general public has to pay an ever increasing licence fee whether they use bbc services or not. Having said that I would prefer to do that than have the extremely annoying never ending advertising you get on the other channels and I watch BBC more than the other channels for that very reason.

As to BBC pensions, they should be treated as other private companies and if there is deficit then the gap needs to be filled by higher contributions or reduced benefits. There has been a problem over recent decades in that when pension funds were doing well employers took holiday contributions then of course Brown slashed the dividend credits to put the final nail in the coffin of final salary pension schemes. These need to be stopped in private and public sector for everyone now, benefits frozen and properly funded schemes from now on. Will be a hard pill for some to swallow but we cannot lumber the next generations to come with the problem any more. The difficulty with this is that we are all then very reliant on stock market performance particularly in final years before retirement and will have to move into safe funds 5 years or so before final retirement date, if there is such a thing any more. On the plus side it may help people engage more in taking responsibility for funding their retirement. I am astonished at many people's understanding or interest in pensions.

Comment number 32.

Sometimes it is necessary to state the obvious. Pensions are the result of investing money (except pay as you go schemes - state pension mainly). When the investment market's interest rate collapses as it has done (as the result of totally inept and mindbogglingly stupid non-regulation by the Bank of England and the Treasury) then the capital built up will not provide the pensions promised.

The only remedy for the problems of pension funds is to see a rise in annuity rates and as these relate directly to market interest rates the only remedy is to see substantially higher interest rates. Nothing else will prevent the ever downward spiral of pension funds. Blame Mervyn King!

-------------------------------------------------------------We are setting things up for another 'perfect storm'. Remember the last one, around two years ago?

There was announcement of a house price 'expectation' from Government this am that did not excite comment in the second half of the TOADY prog that I listened to. The Government expects there to be a steady rise in house values over the next five years. We really need a steady, but very gentle and gradual fall in house prices, so in my view we're headed in a wrong direction there.

A traditional cure for any one of the above is likely to make one of the other problems worse.

We've taken one deep breath and are going for cuts in state spend as a cure. We need to take another and say, 'there may be some repossessions (and each is a tragedy for someone) but interest rates have to rise steadily now, above the level of inflation, to encourage saving, capital preservation/inflow and an end to funny money'.

GO could, and in my view should, have taken back control over interest rates for a limited period (life of the Parliament?) in order to deal with this. Next task for him: move the weight of the tax burden up the income ladder. He's made a start, there's lots more to do.

Comment number 33.

Comment number 34.

Many moons ago, when Aneurin Bevan and others conceived the welfare state, they worked out retirement age to be 65. Of course, in those days, with the amount of work-related illnesses and accidents, not really all that many people, comparatively, reached 65 and even if they did, with the healthcare back in those days, they probably didn't live all that much longer. So now we have to completely re-conceptualise the notions of pensions, retirement age, etc., etc.

And it's pretty much the same with civil service, local government and other pensions - yes and the BBC one too!. Since they were originally conceived and implemented, the world has changed and the economic world especially so.

It's no good people having the same expectations about pension funds or employer's ability to fund a pension scheme, because the whole ball game has changed.

My guess, for what it's worth, is that some schemes, e.g. LGPS will remain in some form or other, but 1) the underwriting will change - e.g. perhaps there will be different schemes for single people and for married/partnered ones - and 2) the 6% employee contribution will have to rise pretty substantially, perhaps to something like twice that amount or even more.

And my understanding is that Councils basically fund the scheme out of their current revenue budgets. That method being based on the myth that we're all getting better off and richer year by year and will always continue to do so. Which is, of course, completely true except when it isn't, like now. Much in the same way as property prices always go up, except when they don't.

Comment number 36.

#8 >>So would I advise anyone now to take this up as a career? No way. The excitement and pension (which went with a less well paid job than I could have got in the city etc etc) won't in future be making up for the financial drawbacks - bright graduates with choices go elsewhere. Broadcast journalism will excited you for two decades then leave you without a career or money or pension worth anything.

So learn to cook and do a cookery show instead !! Or learn to dance and prance the night away on various reality shows !! John Sargent seemed to have done OK !!

Comment number 38.

Oh, I suppose I should add to 34 and deal with the issue of blame, because we Brits like to demonise someone for out problems.

Well, you can blame the current Government, of course, and being on the end of that blame is, I suppose, an occupational hazard of being elected.

You could blame those who originally conceptualised the welfare state and the various pension schemes for failing to work out that there would be good times and bad, booms and bust or for failing to realise that more people would grow older and being better paid would expect / demand a higher life style in retirement.

Or, if you are a victim of what now seems to be a significant threat to your retirement plans, perhaps you should blame yourself, at least to some degree, for not seeing this coming.

Of course, if you are say in your forties or early fifties, you'll be reassured by knowing, as everyone does, that as the economy improves we'll all go back to nice, safe, abundant pension schemes again ...... or will we?

Comment number 39.

My heart bleeds for this overpaid parasites working for this organisation who do not have to earn for their living. Nearly 5 billion £s are handed over on the plate to be dished out to likes of Jonathan Ross, Graham Norton, Bruce Forsyth, Alan Yantoub and so on.

I would love to see how much they would be worth in the open market. Sack the lot close down and sell off the BBC to highest bidder. I am certain there would be many who would be interested lock stock and barrel.

Relief for many a hard up folks and no burden on the tax payer- I wonder why George Osborne has thought of this before????

Comment number 40.

#18 >>Why would anyone pay into a scheme that constantly falls in value the longer you are in it? That would be a very stupid investment and you could end up with almost nothing.

>>Time to join the Union.

Unfortunately this is what the union wanted !! It might have been better if everyone was allowed to chose the form of savings they think is best for themselves !! But the unions enforce standardisation across the board and no one is allowed to think for themselves except the union bosses !!

Comment number 42.

The stock market is dominated by pension funds, and yet they are amongst the most short-termist 'instant profit' investors around... when they are the very ones who ought to be looking at long-term investments designed to promote sustainable growth. That is how they will be able to meet their obligations to those who have invested in them by choosing them as fund managers. But they'd rather go for the fast buck, putting themselves first, and it is such narrow selfish strategies that are preventing the stock market from playing its part in regeneration of the fiscal climate. The 'market makers' should be taking a lead in pushing markets up and increasing confidence in the economy instead of their so-called 'reactive' stance that does even them, never mind the economy as a whole, such a disservice.

Oh, and do not BBC employees sign a contract covering their pensions when they enrol in the scheme?

Comment number 43.

Interesting comment. It's the age old civil service / local government trick of "cost-shifting". Usually this takes a form of games such as hospitals closing wards which force local authorities to pick up the cost of putting the people who were in those wards into care provisions in the community. Hosptial saves dosh, local authority forks it out. (Oh and by the way, council tax is only one part of local authority revenue, a big dollop comes from Central Government funds).

What you are probably witnessing is a form of 'cost-shifting' from the more aged groups to the younger ones.

Most cost-shifting is unsustainable, so I suspect cracks will soon appear in this strategy too. Hell, I thought people were trying to reduce negative incentives for being in employment vs being on benefits?

Comment number 44.

Government is now targeting all such schemes where the organisation receives its income directly or indirectly from the public purse.

However, the one scheme I have yet to hear about is the MPs pension scheme:

[Unsuitable/Broken URL removed by Moderator]

Final Salary, Accrual at 1/40th or 1/50th. (10% or 6% contribution)

If the Universities Scheme (again separate fund like the BBC but without the deficit) is being deemed "gold plated" by ministers with an accrual rate of 1/80th what are they doing about their own scheme? Shouldn't it should be closed to new members immediately?

Comment number 45.

"6: The LGPS may be funded, but by whom? By council tax payers, nearly 30% (thirty!!!) of which goes to pensions. If my company tried to use 30% of the selling price of our goods to stick in the pension scheme we'd never sell anything, they'd be way too expensive."

Yes, but councils do not just get money from council tax. Most money spent by councils comes from Central Government. So while you can suggest 30% of council tax is spent on pensions, you could also suggest that the money for pensions and staff salaries come from government, and council tax covers costs of buildings and equipment.

Comment number 47.

The problem is Robert that if there is a mismatch between liabilities and funds then more put into the pot by the employer reduces the effectiveness of the business. That is seen by the customer as a drop in services and products. Where there is an alternative then they will buy from a more efficient provider. Where there is no alternative eg LGs and the BBC then they will pressurise for privatisation and opening up the market. So whatever goes it is slim, fat boy, slim. Which is a hard change in behavior for some. Let alone when very much minority audiences complain that they have lost their 'own' prodcut that they feel they have a 'right' to. Probably time to stop trying to be all things to all men. Enjoy. BTW when gold plating wears thin because others are unlikely to want to cough, it is not hardship. Hardship is when all payment stops.

Stanlic at 26

The last figs I saw, an mixed bag from various sources, were 1 pound in 3 of LG income goes on LG pension liability, roughly 1 pound in 3 raised from council tax, 2 from 3 raised from central government, LG pensions underfunded by 20 percent, 80 percent of LG cost is labour, people. Cuts make it all worse and I cannot see how the figure shrinks, it is due to get bigger. I could be wrong as the figs tend to vary depending who does the accounts and who does the talking, oh yes and how much of a financial instrument they play, usually a violin. I suspect a disproportionate amount of LG activity is focused on proving they operate within PCness, as in reality their customer, the largest payee, is the Government. The problem is they also wish to claim their customer is the local population. Its called a monopoly playing one off against the other. LG services are due to look very very expensive for what is actually provided.

But I guess we are reaching the end of the line, so the ticket to ride lapses. The expanding universe model has met contraction. But the reality is this impact whilst felt by all is at its most effect with groups that have been largely sheltered from the storm. But it is impressive how they take the introduction to the new so stoically and with such sangfroid : )

Comment number 48.

I think if I were a BBC worker I would be wanting to know why the fund is out of pocket. My local goverment fund is not. Perhaps there should be a review of the management of this fund. Also perhaps the Government should keep its thieving hands off dividends payed to pension funds and ringfence the money so that it cannot be used by the company.

Comment number 49.

I have mixed feelings about this. I don't like the idea that you join a pension scheme on one set of terms then pension providers can change those terms when they like. It seems like agreeing to but a car for £10000, putting down a deposit then when you come to pick it up the seller says you can only have it for £12000.

On the other hand getting 60ths and retiring at 60 seems quite relaxed. I have one of the public services gold plated pensions which pays 80ths upto a maximum of 42/80ths which will bring me in just over £9000pa after almost 48 years in the NHS when I retire at 65 and I still consider myself lucky compared to some so I find it difficult to have a lot of sympathy.

So I can understand your disappointment and concern for the future but it is still not too bad a pension scheme.

Comment number 50.

#28. Down_with_Dogma wrote: ...At 23 I am already resigned to the fact that I will be working until I drop to fund the gold-plated pensions my parents/grandparents have awarded themselves. Oh, and did I mention that whilst I contribute to their 20 odd years of Saga cruises, such generous schemes have already been closed to me!!!!....."A future fair for all"...Pah!

It is quite true that the baby boomers have got away with the biggest transfer of wealth imaginable in this country, both in terms of property and pensions. Of course it has been these same boomers who have been in power, quite happy to see their property portfolios increasing in value over the last 15 years.

I disagree with John from Hendon about M. King being constrained by the government's inflation targets forcing him to not raise interest rates. Although I don't know what property he owns I'd be amazed if he hasn't benefited greatly from rising house prices.

However, there is hope for you Down_with_Dogma. Those of the younger generation who want to do something about it can do so with political action. There are enough under 40s that over the next ten years there could be a growing voice for a fairer distribution of wealth. Although you cannot legally stop the boomers from getting their unfair pensions, you can raise new taxes aimed at getting the money back from them!

However, will the younger generation rise up against their parents? In the middle classes it's these parents that are providing house deposits and many other gifts to their children from their wealth.

Comment number 51.

When final-salaried schemes offering one-sixtieth for every year worked were introduced life expectancy was 67 for men and 72 for women. So if they are not abolished we have to introduce compulsory euthanasia at 69.5 for all public-sector pensioners.

BBC governors, and HMG ministers, only have an interest in the short term, so where are the people with the guts to do something about it going to some from?

Comment number 52.

This is totally outrageous - an effective massive cut in the staff pension. With inflation averaging 3.5%, even by the CPI standard, staff with 20 years to go until retirement are set to receive a pension only half as big as they would otherwise receive! I cannot believe this will go through unopposed. It is not only the right, but the duty of BBC employees to oppose this plan strenuously, with every mechanism available to them.

Comment number 54.

Everyone is at each other’s throats over pensions, and there is good reason for this.It is to do with inequality.A good example of inequality is the pensions of MPs who have dramatically improved their pensions over the last years.

I think a good starting point would be for them to lead by example.

When they have created an affordable scheme for themselves they can open it up to the rest of us.Its never going to happen though - is it?

Comment number 55.

"6: The LGPS may be funded, but by whom? By council tax payers, nearly 30% (thirty!!!) of which goes to pensions. If my company tried to use 30% of the selling price of our goods to stick in the pension scheme we'd never sell anything, they'd be way too expensive."

Yes, but councils do not just get money from council tax. Most money spent by councils comes from Central Government. So while you can suggest 30% of council tax is spent on pensions, you could also suggest that the money for pensions and staff salaries come from government, and council tax covers costs of buildings and equipment.

But never let the facts get in the way of a good rant!

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Either way, it is a reasonable response to #6 who implies LGPS are not funded by tax payers. Rant valid IMO.

Comment number 56.

The problem for many pensions in deficit, or a yawning black hole, is the sheer number of companies and public organisations' pension funds taking up Gordon Brown's 'pension holiday'? In other words, taking monthly employee's contributions, but employer not paying their contribution each month.

Therefore, only a fraction of investment available to build upon over the longer term? It's complicated but explains much happening to many pension 'difficulties'?

If your employer has taken a GB pension holiday - you must certainly be entitled to know?

Comment number 57.

For years, employers have been wanting to ditch defined benefit (DB) schemes and load all the risk onto the employee with defined contribution (DC) schemes. DB's were grand back in the 70's and 80's when the employer could raid all the surpluses that were around then but since the 90's have only been of benefit to employees and that just won't do in our capitalist system. Had they of course left those surpluses alone there wouldn't be any deficits today. It seems that the mantra of "investments can go down as well as up" only applies to the consumer.

I did some research earlier this year that showed how the anti-DB PR message has really picked up in the last few years from governments and employers.... and the media (who are of course employers with DB schemes that they want shot of)!

DC schemes (private pensions that will be forced on workers - take all the investment risk and you never know what you are going to get when it eventually pays out) only benefit employers and the financial services industry - the fees and charges and commission paid on them is horrendous. This and their restrictions on the purchaser are criminal and being forced to purchase an annuity on retirement only benefits one group of people (the financial services industry).

One of the policy options that many governments are looking at just now are how they can get everyone into these kind of DC schemes not only as a way of limiting what they have to pay by way of pensions but also to bolster the financial services industry... which as we know, have hit terribly hard times recently and need all the money they can get!

And what I've written above isn't guessing. I know this because I worked in the industry for many years (not selling I hasten to add - I'm more of a back office whizz) and I currently advise a politician (not a UK one). Neither the industry nor governments give a damn about the 'little people'. The future of pensions? That's a problem for someone else. Manyana. Breach of contract? What are you going to do about it? Strike? There are plenty out there (and it's a number that is only going north) that will take your job.

There are some very tough times coming up. A double-dip, and a years-long depression, is looking more likely every passing day and if you currently have a DB scheme, do everything you can to keep it.

Comment number 58.

The gist of most posts seems to be that all pension schemes need to be brought down to the level of the most basic schemes available.Why does this have to be? Is it beyond the capabilities of fund managers to come up with properly funded schemes that will provide for workers a reasonable pension after 50 years of contributing to a company scheme? Don't actuaries supply the information needed to make this possible? Surely 50 years contributions, properly invested, (assuming working from 20 to 70) should provide a big enough pot to give a decent pension for 15 years (assuming death at 85)If not, then it's a sorry outlook for future generations.I despair.

Comment number 59.

my personal pension that I pay into has been decimated, and whilst I would like to join the crowd and bemoan the public pensions that I too contribute too one thing stands out.If as little as 20 years ago pension funds were generally funded well, then where has the money gone ?It has been stolen by the spivs with their fees and by the spivs in the city using the pension fund rules to cover their other positions, by other companies companies for their pension funds (mirror group anyone).

The spvis , banks and financial institutions have and continue to suck money out of the pot, they will never suffer their wealth increases , it is only the proles who will suffer.

Will this be looked into or changed, no because these people run things for their club and have the government in their pockets

let them eat cake , at this rate there will be no cake left for anyone

Comment number 60.

"Either way, it is a reasonable response to #6 who implies LGPS are not funded by tax payers. Rant valid IMO."

Argue that it is funded by tax payers by all means - of course that is true. But using misleading facts and figures just undermines the argument.

As employers of course we tax payers fund public sector pensions. Just as shareholders in my company fund our employee pension schemes. The important question is why is it okay for the government to assume that tax will keep going up and cover the cost of future pensions whereas private firms are not allowed to assume that profits will keep up? Surely the government could just start offering employer contributions to a private pension as most private sector companies do now. Thats certainly what I would expect from "independent" government bodies such as the BBC.

Comment number 61.

An excellent posting by Robert Peston, and considering that private pension-holders are facing horribly low annuity rates because of the Bank of England's low-interest rate policy, the BBC's actions are necessary.

(Why are pensions so mismanaged?

The stock market is dominated by pension funds, and yet they are amongst the most short-termist 'instant profit' investors around..)

Sadly the financial system and governance of corporations that has evolved over the last 40 years is largely due to the pension funds/institutional investor system, not just in Britain, but in Europe, North America, Australia and now much of Far East Asia.

The institutional investor system is not just short-termist, but bereft of Economic Design/Politics, so the default has been to go with the endless Globalist Economic Expansion.

What does this mean to someone in Britain with a pension? It means your pension has depended for years on investments ALL over the world, while businesses in Britain have struggled and failed to compete and everybody gave up recommending anything but the Financial Industry and the Soft (eg software) industries. The Pension Funds have been instrumental in Britains decline in Economic Resilience.

Comment number 62.

Very sad to see pension cuts. But BBC reporters and interviewers have argued stronger than tory spin doctors in favour of the urgency in tackling the budget deficit. Follow your own logic, cut further and propose job losses in this public corporation.

Comment number 63.

The future is everyone provides for themselves, with a basic state pension of a hundred quid a week each.

If public sector employees had actually contributed properly towards their own pensions there would have been a lot more sympathy for them but very few ever did.The entire setup was a ponzi scheme.

A maximum payout of three grand a month per person should be imposed on all public sector pension liabilities, there's a load of government fatcats who need to make some sacrifices in their countries hour of need.

Comment number 64.

Please spell this out in simple terms. A twenty three thousand pound a year pension, index linked, bought on the open market, would need a saved pension pot of over six hundred thousand pounds. Many in public service will retire on over thirty thousand pounds a year. Is it fair that a section of society is able to retire wealthy, effectively as millionaires, subsidised by those who will retire into relative poverty.

Comment number 65.

"6: The LGPS may be funded, but by whom? By council tax payers, nearly 30% (thirty!!!) of which goes to pensions. If my company tried to use 30% of the selling price of our goods to stick in the pension scheme we'd never sell anything, they'd be way too expensive."

Yes, but councils do not just get money from council tax. Most money spent by councils comes from Central Government. So while you can suggest 30% of council tax is spent on pensions, you could also suggest that the money for pensions and staff salaries come from government, and council tax covers costs of buildings and equipment.

But never let the facts get in the way of a good rant!

....................................................

Either way, it is a reasonable response to #6 who implies LGPS are not funded by tax payers. Rant valid IMO.

....................................................

Could I point out that LGPS members are also taxpayers. We are not a separate entity, therefore, yes, LGPS IS funded by taxpayers - us members!

I get bored by people saying "we taxpayers" as if WE aren't.

Personally I didn't even know about the pension scheme until way after I took up my job. It wasn't what attracted me in the first place - that was just getting a job. The way things are going no-one will ever get a pension anyway - we will all die in service.

Comment number 66.

The problem is mainly the result of the investment losses following on from the collapse of the banking system. Increased contributions from current staff to pay for extra longevity is perfectly reasonable, because they are the people who will enjoy longer retirement. But why should they, or anyone else in a similar scheme, have to pay for the blunders of the highly paid "expert" professional investment advisers who failed to notice how risky some of the investments they were recommending were? No reasonably well informed person should have failed to recognise the dangers of the asset bubbles which built up alarmingly during the early 2000s.

In a country, unlike the UK, with a system of law which was not heavily biased in favour of big corporations and the wealthy, it would be possible to recover damages from those who were negligent. The only reasonable alternative is for the BBC, or indirectly the licence payers, to make good the losses.

The investment industry made huge profits and paid generous salaries and bonuses. Where did this money come from? From those like BBC staff, who had no alternative but to hand over the management of their savings and pension pots, to these parasites.

Unfunded pension schemes, whereby current employees pay the pensions of retirees and in return receive a pension paid for by the next generation of employees are safer and in the long run more efficient, because the depredations of the investment industry are avoided, and index linking to current salaries can be built in.

The BBC, as effectively a publicly funded organisation, should never have had a funded scheme. Private companies, which by their nature cannot guarantee that there will be a next generation of employees, should by law be required to invest pension funds only in a special fund, index linked and guaranteed by government, cutting out the middle men, and contribution holidays should be banned.

Comment number 69.

Now you know how the rest of us feel after our pensions have been decimated by Gordon Brown, poor regulation and incompetent/greedy financial institutions.

You're probably still a lot better off than most of us in the private sector. This is due to us licence payers kindly funding your scheme so generously for so long. If you could post a word of thanks to us we would appreciate it.

Comment number 70.

I'm a Trustee of a large pension fund, albeit a DC fund. My company also has a [closed] DB scheme, and it's well funded. If I was a BBC pension fund trustee I'd be asking serious questions of your investment consultants and fund managers for allowing a £2bn deficit to accumulate. It can't all be down to the reasons you suggest - if they missed the bounce in equities (BCS especially) earlier this year they should be fired.If I was a BBC employee I'd be asking serious questions of the trustees.

Comment number 71.

Public sector (and private sector) pensions are a black hole. These were better exposed to the media and the public by more transparent accounting (there was an uproar at the time of the accounting change). But the new calculations were a compromise. They only reveal part of the truth. The real extent of the problem is much worse.

Subject only to uncertainty about how long the employee/former employee will live, the payments are certain (probability equals 1).

However, they are not being discounted at the risk free rate (the rate of return on UK government bonds of an equivalent maturity). Instead, they are discounted by a smaller discount factor (one that reflects the probability that a UK corporate with a long term credit rating of "AA" will honour its bond obligations. These carry a payment probability less than 1).

There is no logic in discounting pension liabilities to reflect AA corporate bond defaults -- might as well count the number of red cars in the car park and divide by the number of blue ones.

If the risk free rate were more correctly used to calculate pension obligations, deficits would be significantly higher. The media are only seeing the tip of the iceberg. The public have yet to discover the more shocking truth.

The accounting rules will eventually change to introduce reality to this calculation. Some boardrooms and certainly the credit rating agencies already know the extent of this even higher mountain of debt represented by unfunded pension obligations.

Comment number 72.

to #66Who's the parasite. The investment manager, whose fees have will have been fixed and agreed by all parties in advance, or the employees who joined the scheme and paid contributions on the 'understanding' that they would only receive a pension for 10ish years on average and now have the breathtaking audacity to want to live for 20+ years (and in doing so become entitled to a free TV licence!)

Comment number 73.

The LGPS is funded by all local government employees! Unlike the civil service or MP's own scheme..This distinction needs to be made more often when those haters of public employees harp on about so called gold plated schemes...Oh, and by the way all employers have to pay some contributions into a pension scheme if they offer one, so why the apparent venom from some on here against those that work for local government....I'm part of police support staff which is pays into the LGPS....It is not the same as that of the Police Officers. Their scheme is totally different again! There was a comprehensive review of the LGPS only 2 years ago, with changes to accrual rates, contribution increases and entitlement changes all coming into force from 1st April 2008. Following those changes the date at which I could retire and take my pension was moved back 12 years! There are severe penalties and actuarial reductions for any retirement between 60-64. The LGPS retirement age is 65 and always has been...unlike the apparent 60 age of the BBC scheme...Lastly, Only 6% of council tax revenue goes towards the cost of local government pensions not the 30% figure quoted above.The total current value of the LGPS scheme is enough to cover its liabilities for the next 20years, and with the changes already made the security of the scheme is strengthened!

Comment number 74.

I find all the complaints about so called 'gold plated' public sector pensions utterly hypocritical. It is well known that when the demographics meant that employee contributions far exceeded pension payouts in the public sector governments saw them as an additional cash cow. In that sense public sector workers were subsidising tax payers. I do not recall many,or indeed any, complaints in the media about this 'injustice.' We all remember the outrageous employer contribution holidays in the private sector.

Also back in the day as a public sector worker who would occasionally grump about the much higher salaries available for equivalent posts in the private sector I was told 'Ah well you've got job security and a decent pension to compensate you for a poorer salary.' So now I am able to enjoy my retirement with complete peace of mind and have nothing but scorn for the whingers above. This crisis was not caused by public sector workers but by greedy and incompetent financiers and their useful idiots in government.

Comment number 75.

41 - Saving via an ISA might not fare any better. You're using already-taxed income and paying the ISA Manager an annual management charge. A pension contribution is untaxed and attracts a tax contribution incentive equivilent to your tax rate (eg basic, higher etc) and like the ISA, it has an annual management charge. There's no guarantee of the actual shares you've invested in will generate enough profit to make the CGT argument work or allow you to plan for future CGT regulations, so your choice at the moment is to pay the certain income tax now (ISA)and hide the gains or defer it and hope(pension). A long road view is needed here, but it's hard to know at the moment which car to drive.

Comment number 76.

As I tell my children and anybody else who cares to listen, do not start a pension scheme, ever, never! By all means save for the future but manage the investment yourself, you would be hard pressed to do worse than these so called experts who take a greater percentage in 'charges' than the fgund actually makes.

But in a company based DC scheme, the Company pay contributions in on your behalf. My employer pays in 10% of my salary a year - double what I pau and I receive tax relief on my contributions meaning I ppay 60p for each £1 I pay in. Whereas private investments are totally your own, after tax, money. What about those people that say their house is their pension - they have to sell that house to receive anything. Annuities may be poor value but they are paid forever - you own investments will eventually run out.

You shouldn't be giving your chidren and anyone else who cares to listen such 'advice' - eveyone's situation is different and I am sure you aren't a financial adviser.

Comment number 77.

43 "What you are probably witnessing is a form of 'cost-shifting' from the more aged groups to the younger ones."

Exactly. It's a stitch-up between senior managers (older) and union bosses (older) to protect their own personal interests by sacrificing those of junior staff. Older staff got the benefits of under-funding their pensions through not having to make large contributions. Yet it is the young who will pick up the bill through having their own pensions slashed - the same generation who have been priced out of housing so that the baby boomers can have a property empire, and who are now being told by David Willets (who wrote a book on inter-generational theft!) that higher education is an 'unaffordable burden' on the baby boomers who got it for free.

The young are being ripped off by the old, and yet this seems to be strangely absent from all the media reporting on pensions.

Comment number 78.

Instead of grumbling about pensions schemes that are - unless their managers renege on their obligtions - supposed to pay a decent pension, we ought to be putting our feet down with a firm hand and demanding proper pensions for everyone.

OK it will cost, but I'd rather put money into ensuring your and my comfortable retirement than some of the uses for which money I pay out gets frittered away on.

Comment number 80.

The problem with keeping cash in the amounts needed to fund a retirement is that if you are made redundant then that cash is used against you in any benefits assessment.

You also lose the tax relief on the inputs.

The so called pension system reforms introduced by the last government were naturally a tinkering. They had to protect the status quo in terms of Government revenues, now and projected. They did not allow people to act independently of a FS company authorised pension scheme for many reasons, including revenue protection and a desire not to upset the City, as well as the costs of policing independent schemes. They had to set an illusion of greater personal responsibility whilst allowing companies to decrease their total contributions, and to move out of future pension scheme black holes.

There wasn't really that much in it for the individual, except more mountains of complex jargon and much less certainty.

What does it take to fund 25 years of a state pension equivalent from a general savings scheme, having saved consistently over a 45 year period? (assume inflation 2%, and you get 3% post tax interest-that's one hell of an assumption for plain old savings account)

You'll need a fund of about £260000 or so and the state pension will be about £13-14k by then if promises are kept. So that means £1900pa post income tax to save with a year-on-year increase of 2%.

You'll probably need to build in a surplus contribution level to take account of the liklihood of enforced contribution holidays (aka redundancy)

So a modern pension scheme will have to give you the same level of guaranteed income, and because of tax relief you would expect it to cost at least 20% less, and because of course being skilled investment professionals, over a 45 year period, you'd expect them to get far more than 3% pa returns to cover their costs and profits and to smooth your ride.

John, on the whole I like your posts but I am always a little disappointed with your 'blame Mervyn' rhetoric. Correct me if I'm wrong but I believe that Mervyn's hands were pretty well tied by the government. The BoE remit was conrol over interest rates without government interference with the proviso that they keep inflation at or about 2% as measured by CPI, that is with property inflation removed. Under those circumstances I can see little that Mervyn could achieve in the property boom short of resigning and we all know if you resign you no longer affect policy at all.

Clearly you see it different, please elaborate."

The question is about integrity. If we expect the holders of responsible public office to have any or not. Clearly this is where we differ. I expect it and you don't. There is ample evidence that he knew and said nothing. Put in such a position I would have resigned and not turned a blind eye to such an obvious policy error. That is the only honourable thing to do. You clearly believe that integrity does not exist in public of commercial and business life and does not matter.

Further a man without integrity is completely unsuited to being responsible for the future management of economic and monetary regulation - hence he must go.

Comment number 84.

1.Talk of "gold plated pensions" is rubbish - the average in local government is £4,000 a year.

2. if you reduce pensions benefits those that are able (the highest paid) will demand higher salaries to compensate.it will be the low paid (the majority) who will suffer

3. if you reduce pensions, more people will fall on the state in their old age for income supplements and care costs, so no real saving to the state

4. I find the attitude "we've had pain in the private sector so we want others to suffer as well (cos' that will make me feel better)" rather childish and glad I don't work with them.

I don't suppose there is any hope of an intelligent debate about public sector pensions is there? One that includes PS workers in it?

We know the costs have to come down, but if you exclude us from the debate and use it as a way of punishing us for some odd sin of not choosing to be exploited by some private sector cowboy, the consequences will fall on all of us anyway and there will be no overall cost reduction.

Comment number 86.

There have been constant and unspeakable scandals about pensions before, and since, Mr Maxwell (no libel - all info' in the public domain).

So, if your employer is collecting your pension contributions they only have a contract with you - not the pension company, due to UK tax laws. Therefore, if your employer 'disappears' for whatever reason, so do your pension contributions.

Yes, indeed this is legal as your pension contributions are linked to tax laws, NOT consumer protection laws. In other words - you have more protection when buying a TV than a lifetime of work and pension contributions.

PS. Don't forget to ask if your employer took up the Gordon Brown 'pension holiday' where your contributions were taken, but your employer was 'allowed' not to contribute?

Comment number 88.

Yet again we see a clear example of the BBC Executive's inability to manage their organisation. Instead of penalising the ordinary rank and file within the BBC, why not properly look at the costs that the BBC incur at the expense of the licence payer and the general BBC staff - take for example the World Cup coverage - does the BBC really think its justifiable to have the size of team they have in South Africa? Is there anything that Gary Lineker, Alan Hansen, Alan Shearer and co have done from their SA studio that they couldn't have done from London? Have they even been to a game? Does the Breakfast TV sports reporter really need to be travelling round South Africa? Do the 10 o'clock news sport bulletins really need to be delivered by a reporter standing outside a World Cup stadium to tell us about the reaction of English Fans around the world on Sunday evening, the latest events from Wimbledon or the Grand Prix? What an appalling waste of money! Its about time the BBC brought some austerity to bear in the coverage of global news and sport and rather than send large teams of presenters, pundits, hangers-on and support staff to events, lets see some proper financial management! Maybe if there had been some proper financial management the Pension wouldn't have been in such a bad state.

Comment number 89.

I am a pensions consultant so see on a daily basis what kind of money goes into funding these final salary schemes. The people that are in them need to realise how lucky they are, as it is worth about another 40% on top of your salary. I'd be happy to make personal contributions of 20%, YES, 20% to be in one of these schemes ... with the employer matching it with 20%. As it is, I am only in a defined contribution scheme, where the employer only puts in 3%. Spot the difference in the amounts of money going in ................. ?????

Comment number 90.

Yes, the average local government pension is only £4000 per annum .... but what people fail to point out that this is based on an average service of 8 years. If local government employees worked for 40 years, they would have an average pension of £20000 per annum. Please compare apples with apples when quoting figures .... rather than just requoting union sound bites ...

Comment number 91.

There have been constant and unspeakable scandals about pensions before, and since, Mr Maxwell (no libel - all info' in the public domain).

So, if your employer is collecting your pension contributions they only have a contract with you - not the pension company, due to UK tax laws. Therefore, if your employer 'disappears' for whatever reason, so do your pension contributions.

Yes, indeed this is legal as your pension contributions are linked to tax laws, NOT consumer protection laws. In other words - you have more protection when buying a TV than a lifetime of work and pension contributions.

PS. Don't forget to ask if your employer took up the Gordon Brown 'pension holiday' where your contributions were taken, but your employer was 'allowed' not to contribute?

What are you talking about?

Employer's have a legal requirement to pass contributions over wihtin 19 days of the month following deduction.

If the employer goes bust and has a DB scheme there is the Pensions Protection Fund.

Employer sponsored personal pension schemes belong to each member not the employer.

'Pensions holidays' were a result of the (then) government wanting to tax surpluses following changes intorduced by the Finance Act 1986 and only applied to DB schemes.

The Government acted after Maxwell and introduced Pensions Act 1995 followed by Pensions Act 2004.

Comment number 93.

Once upon a time the mantra of public sector employees was that a public sector job may be underpaid relative to the private sector, but the value of the pension was compensation.

That's OK, a pension is effectively a deferred salary, so lose a little now to gain later.

However in recent years public sector salaries across the board, from Nurse to Head Teacher to Council "CEO" have been moving towards private-sector levels of pay, without any balancing reduction in the deferred pay (pension) component.

Comment number 94.

Your numbers are not unlike mine. There are all sorts of apocryphal tales of pension fund shortfalls being replenished from increased Council Tax. I am not sure this is exactly true as local government is a labour intensive activity and so money will need to go to pension funds more so than in other bodies.

As you say, cuts will only worsen this accounting issue eventually necessitating cutbacks in the workforce.

My voluntary work supports council services and I am concerned that given the likely level of cuts before long we will be supporting them.

I agree that we have now run out of road and a new concept of public service has to be devised. I don't think that large offices peopled by the well-rewarded is the future for local government. Perhaps we need to go forward to the past and make local government smaller and more local. It does not have to be expensive but we do need the basic services such public bodies can provide.

Comment number 95.

NO POINT IN PAYING INTO A PENSION! They are the biggest ponzi schemes ever how can people not see it? The generation coming up to retirement will be milking pension pots for years to come, pensions will crash eventually could be 20-40 years but they will. The European leaders are looking at ways in which they can get employment up because they don't have enough young people making enough contributions to prop up the older generation...ponzi scheme! The UK are also in a panic and thats why they will try force everybody into paying into theses fake schemes. I for one will opt out straight away, its a joke. My retirement age will probably be 80+ in 40 years time and i'll be 68! I've watched these advisors promise all my work colleagues 500k! yet what he didn't tell them was that they needed to contribute £300-500 a month! All my mates are paying in £30 they'll be lucky to get 5k a year when they retire! and what will the price of bread be, £5? we got a long way till retirement i've made my plans and i ain't buying into it! If all us under 40 stopped contributing to the system it would collapse! YOU ARE PAYING FOR SOMEONE ELSE TO RETIRE!

Comment number 96.

But in a company based DC scheme, the Company pay contributions in on your behalf. My employer pays in 10% of my salary a year - double what I pau and I receive tax relief on my contributions meaning I ppay 60p for each £1 I pay in. Whereas private investments are totally your own, after tax, money. What about those people that say their house is their pension - they have to sell that house to receive anything. Annuities may be poor value but they are paid forever - you own investments will eventually run out.

You shouldn't be giving your chidren and anyone else who cares to listen such 'advice' - eveyone's situation is different and I am sure you aren't a financial adviser.

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Ha Ha! you wish I was!.

I started my pension in 1972 and being grossly overpaid I contributed £250 p/m to my pension. Not a lot by todays standards but trust me, it was a small fortune then. A few years later I increased it to £300 p/m and it stayed at that level until I cashed it in for an annuity. At the same time as increasing my pension I established my own managed pension of £300 p/m. I had given the official pension 3 - 4 years start. By the time I cashed in the 'pension' proper was worth £98000 plus change, a little less than I had paid in. My own managed pension was worth £1.2m, now £1.4m and all safely tucked away out of this country.

Pensions are imo a legalised rip off. True there are varying levels and if your employer doesn't/hasen't decided to take a holiday and the pension fund doesn't collapse your fund may be O.K. Good luck with that.

Comment number 99.

1.Talk of "gold plated pensions" is rubbish - the average in local government is £4,000 a year....

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I dont think the term "gold plated" refers to the size of the pension, which in itself is a function of the salary levels and period of service of the "average employee" which oddly enough are not revealed when such numbers are quoted.

The "gold plating" reference comes from the security of value of the benefit, both at the point of inception and through indexation in retirement, and from the huge disparity in cost v benefit.

To bring life to the comparison, lets assume the 4,000 pa "average pension" of the "average employee" arises from 12 years of service that ends with a final salary of 20,000 pa (12/60 x 20000 = 4000). This would need an accrued pension fund of 80,000 based on extremely generous annuity terms i.e. an average contribution & increase in fund of over 6,000 per year.

This is nearly one-third of the employees final salary every year (and realistically significantly more in prior years as it is unlikely that they would be earning 20,000 every year).

Please stand up any employer / employee who sets aside over one-third of their gross salary each year to fund their pension....

Comment number 100.

How much valuation did the fund lose in the banking crisis? Going from a very good scheme to a good scheme in these times is not so bad. The banks could be asked to contribute as this and other pages have absolved them of all wrong doing and promoted their extortion of the government/taxpayers as something worthy.

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